Several of my clients have recently expressed dismay to me about the closure of their local HSBC branches in and around London.
Bank closures are of course nothing new, but I admit to feeling a tinge of sadness upon hearing this news. I was based in these particular branches for a number of years and have some fond memories of the people I worked with and the clients I served. My wife and I first met in a bank too, so branches are very dear to my heart!
We’ve seen a fifth of UK bank branches disappear in the last five years alone and this trend shows no sign of stopping. The rise of digital banking has played a part, but this has and will continue to have a knock-on effect for the many people who prefer to deal with their financial affairs on a face-to-face basis.
None more so than those seeking financial advice.
There was a time in the not too distant past when your local bank branch was the first port of call – not just for payments and transactions – but also for financial advice: buying a home, planning for retirement, investing savings and even arranging wills and trusts.
Regulatory and commercial pressures have seen many banks remove regulated financial advice services from their branches. To make matters worse, banks that do still provide advice seem to constantly change or limit their services in some way – usually to achieve operational efficiency for the business itself, not its clients.
In MY day….
During my 12-year stint as a financial adviser in a bank, another common and very frustrating trend for clients was the transient nature of the workforce. Regular internal restructuring means advisers and relationship managers rarely tend to work in the same branch/area for more than a year or two. It takes time for clients and advisers to establish a rapport and trust with one another, so being passed from pillar to post can be very unsettling.
It’s encouraging to see some newer entrants to the banking sector challenging the old guard and going back to service basics and developing relationships with their customers. Metro Bank, for instance, are one of the big success stories but even they’ve chosen not to offer regulated financial advice, which doesn’t help those who would usually seek advice from a bank.
So with the shrinking branch network, non-existent/inconsistent services and a transient bank workforce, where do newer investors or even disillusioned bank clients go for advice?
1. Shop around the banks
Several banks still provide regulated financial advice and upon closer inspection of their services, you may find these fall under what’s referred to as Restricted advice(as opposed to Independent). This term causes a bit of confusion, but basically means the bank have chosen to offer clients their own or a limited range of product/fund solutions from the wider market.
Restricted advice can also mean they choose not to provide advice in all financial need areas e.g. offering investment advice but perhaps not pensions or Inheritance Tax solutions.
There’s nothing wrong with this model in principle; that is provided their service offering meets the needs of their client base and they aren’t shoehorning their clients into unsuitable products or failing to address wider financial needs.
Depending on which bank you approach there may be a minimum amount you’re expected to invest (typically £50,000). If you’re thinking of taking financial advice from your bank, go in with your eyes open and expect the staff and service goalposts to move on a regular basis.
Please note some banks do offer independent financial advice.
2. Embrace technology
Developments in financial services technology are creating alternative channels to help deliver advice and even empower people to make decisions without advice.
It’s been possible to access financial advice remotely (e-mail, telephone and Skype) for some time now. Advisers take clients through the advice process via an agreed method of contact and employ online tools and questionnaires in real-time. This has some advantages, particularly time and travel savings to both parties.
An extension of this is what’s been coined Robo-Advice. This is still very much in its infancy but at its heart is an online wealth management service that provides automated, algorithm-based portfolio advice with little or no human intervention. Taking financial advice from a computer sounds like something out of a Philip K. Dick novel but it’s assumed this will particularly appeal to millennials and future generations of client.
These technology-dependent approaches will almost certainly gain further traction in future and should go some way in helping to plug the advice gap. In my view, it’s unlikely they’ll completely replace the traditional face-to-face advice service – the personal touch can be very important to those making big life decisions
For more confident and active investors, several banks and fund managers offer online investment platforms allowing investors to pick and choose from the thousands of funds available in the retail investment market. Platforms come with a range of tools to educate investors on the risks and help them select suitable options.
I’ve used many platforms in my time and these are a very slick and efficient way of investing money in funds and shares. The obvious point here however is that the decisions are entirely your own and as with anything you choose to do without professional guidance, errors of judgment can be costly.
4. Independent financial advice (IFA)
An IFA has access to the entire fund/product marketplace and therefore able to select the most suitable solutions for a client. Alongside this, they may offer additional services and advice to complement and further bespoke the core investment management. These services typically include:
- Cashflow modelling – understanding and projecting your future wealth, and plotting a path to meet your financial needs e.g. lifetime income requirements.
- Technical advice around pension and trust planning.
- Tax planning – optimising the capital gains, income and inheritance tax position of your investments and estate.
This tends to be a more comprehensive service with a focus on building a strong long-term relationship between adviser and client. Online platforms like those mentioned above are often utilised by advisers to help keep the client’s affairs simple and straight-forward.
Different IFAs have their own minimum investment threshold but £100,000 isn’t untypical. Do note that some adviser practices may choose to operate on a Restricted basis, so you should ask at the outset to confirm their precise status, particularly if you prefer access to the whole of market.
Which model is best for you?
No easy answer here I’m afraid. Amongst many factors, this will depend on:the complexity of your circumstances.
- your knowledge or level of confidence.
- general level of interest and time available to devote to managing your money effectively.
- the type of service you value.
When it comes to money, knowing which way is right for you isn’t alway straight-forward. This often causes people to stick with what they’ve got, to what they know, or even worse, doing nothing at all.
These tend not to be the best bases for achieving your financial goals or a successful investment experience. If you need to further understand and talk through the options, please feel free to get in touch.
Thanks for reading.